Many people avoid budgeting at all costs for a variety of reasons. Some people think that they won’t be able to stick to it, so why bother? Some people don’t really understand what a budget it. Most people that I come across don’t budget because they don’t know how, and don’t think it will help them. So let’s go over some of the key reasons why creating a budget can help you:
- Save money. By creating a budget you are creating a goal income for your business. This usually involved cutting some expenses that you do not need or may be spending too much money on. For example, a business owner purchases lunch for her employees almost every day amounting to $750 a month. While it is a nice gesture, it is not a need of the business. The business owner creates a budget in which she only purchases lunch once a week. This brings the amount down to $200, saving $550 a month.
- Create a goal income. When creating a budget you are basically creating goals for your business. You look at how much money you would ultimately, but realistically, like to bring in from customers. When you do this, you then think of that goal every time you are purchasing new product for your store, bidding out jobs to customers, and deciding if you should sell items on your website or not. For example, a retail store selling craft supplies is preparing an order for next month. There are some items that they know their customers will love, but the items have a small profit margin. There are also lots of items that may take some time from the owner and employees to demonstrate, but they have a high profit margin. Before the budget the owner tended to lean towards the items that sell themselves, but with the budget the owner realizes there should be a least a mixture to help bring the income up. Many times items that can bring you in more profit take more time to sell, but can be worth it, especially during low traffic times.
- Focus on your business and personal goals. When create a budget you can adjust it to help meet your goals. For example, a business owner’s goal may be to spend more time with his family. This means that he needs to hire a new employee in order to take more time off. He created a budget to see how to increase income or cut expenses to be able to afford the new employee.
- Help plan for the future. A budget can help you save money to purchase new equipment, prepare for an emergency, or pay down debt. If you cut costs the extra money can be saved away so that when you need extra cash you don’t have to get any financial help.
- Sleep better! Having a financial plan for your business can help you relax and sleep more soundly at night. You may not be able to stick to every part of your budget every month, but even just having a plan and goals can ease some stress.